Finding Text
FINDING 2024-002
Subject: Child Nutrition Cluster (IDEA) - Procurement
Federal Agency: Department of Education
Federal Programs: School Breakfast Program, National School Lunch Program
Assistance Listings Numbers: 10.553, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
Condition and Context
Federal regulations allow for informal procurement methods when the value of the procurement for
goods or services does not exceed the simplified acquisition threshold, which is customarily set at
$250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when
small purchase procedures may be used. This informal process allows for methods other than the formal
bid process. The informal process is divided between two methods based on thresholds. Micro-purchases,
typically for those purchases $10,000 or under, and small purchase procedures for those purchases above
the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be
awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then
price or rate quotations must be obtained from an adequate number of qualified sources. If it is determined
a single source provider can be used for a small purchase, documentation must be retained supporting the
determination.
Two vendors that exceeded the small purchase threshold during the audit period were selected for
testing. In both cases, the School Corporation was unable to provide documentation of three quotes
obtained from vendors for the specific purchases that were made.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides
reasonable assurance that the non-Federal entity is managing the Federal award in
compliance with Federal statutes, regulations, and the terms and conditions of the Federal
award. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
2 CFR 200.318(i) states:
"The non-Federal entity must maintain records sufficient to detail the history of procurement.
These records will include, but are not necessarily limited to the following: rationale for the
method of procurement, selection of contract type, contractor selection or rejection, and the
basis for the contract price."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures , consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases —
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold but
does not exceed the simplified acquisition threshold. If small purchase procedures
are used, price or rate quotations must be obtained from an adequate number of
qualified sources as determined appropriate by the non-Federal entity. . . ."
Cause
The School Corporation's management had not developed a system of internal controls that would
have ensured compliance with the grant agreement and the Procurement compliance requirement over
small purchases. The School Corporation indicated they originally did not intend to spend that much with
those vendors, but due to circumstances, ended spending over the small purchase threshold.
Effect
The failure to establish an effective internal control system enabled material noncompliance to go
undetected. As a result, adequate documentation was not retained for procurements that fell within the
small purchase threshold. Noncompliance with the provisions of federal statutes, regulations, and the terms
and conditions of the federal award could result in the loss of future federal funding to the School
Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure all required documentation is retained and
provided for small purchases.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.